It is not at all surprising in Hong Kong for job applicants to back out of the already accepted job offer and accept a better job offer with a more competitive remuneration package. In practice, usually the innocent employer would save themselves the hassle of chasing after the defaulting recruits and simply find a substitute from the job market, especially for those junior or middle-level positions. However, this may not always be the case and the recent judgment handed down by the Court of Appeal in the Hong Kong case Law Ting Pong Secondary School v Chen Wai Wah  HKCA 873 demonstrated clearly that not honouring a signed employment contract may come with a price even before commencement of the employment.
Overview of the case facts
The case of Law Ting Pong Secondary School started off at the Hong Kong Labour Tribunal and was argued all the way up to the Court of Appeal.
In gist, this case concerned a teacher who was offered employment by a local secondary school. On 17 July 2017, this teacher was given (a) an Offer of Appointment; (b) the Conditions of Service for Teachers; and (c) a Letter of Acceptance in respect of his then potential employment with the school. The teacher signed and returned the Conditions of Service and the Letter of Acceptance to the school on the same day. The Letter of Acceptance stated that:-
“I accept the appointment offered in your letter dated 17th July 2017 in accordance with the attached Conditions of Service for Teachers in Law Ting Pong Secondary School.
I also understand that once I accept this contract, the conditions of the new contract will come to [sic] immediate effect e.g. I need to give three months’ notice to terminate my employment with the school.
I confirm that I have read and understood all the above conditions and hereby agree to abide by them.”
The Conditions of Service stated that the period of employment would be “from 1st September 2017 to 31st August 2018”. Under the Conditions of Service, the teacher was required to give the school three months’ notice in writing, or payment in lieu of notice, or a combination of both in order to terminate the employment contract “in order to terminate my [i.e. his] employment with the school” [Emphasis Added] (the “Termination Provisions”). In August 2017 the teacher backed out of the contract. The school then claimed against the teacher for payment in lieu of notice pursuant to the Termination Provisions.
The school succeeded at the Labour Tribunal and was awarded damages in the sum of HK$139,593 (equivalent to 3 months’ payment in lieu of notice).
The teacher subsequently appealed against such decision and the same was overturned by the Court of First Instance. The Court of First Instance held that the Letter of Acceptance did not form part of the specified terms offered by the school to the teacher, as, inter alia, the Conditions of Service did not make any reference to the Letter of Acceptance. Accordingly, the employment should be read as only starting on 1 September 2017 in accordance with the terms of the Conditions of Service, and hence the teacher was not liable to make any payment in lieu as his employment had not commenced at the time when he back out of the employment contract.
Thereafter, the school further appealed against the decision of the Court of First Instance and the Court of Appeal restored the decision of the Labour Tribunal. The judgment of the Court of Appeal can be summarized as follows:-
The case of Law Ting Pong Secondary School suggests that once the employment contract is signed, the agreed notice under its termination provision has to be observed, even before the commencement of the employment.
However, it is arguable that Law Ting Pong Secondary School turns on its specific facts that the employer school has made it explicit on the Letter of Acceptance that the conditions of the employment contract came to immediate effect upon execution and the notice requirement under the Termination Provision was specifically used as an example for illustrating the same.
Further, it is also not certain as to what the Court’s decision would be if any probation period is provided for in respect of the relevant employment. It seems the Court did not pay any regard to Section 6(3A) of the Employment Ordinance (Cap.57) when reaching its decision in Law Ting Pong Secondary School, which provides that:-
“Where in any contract of employment, whether in writing or oral, it has been expressly agreed that the employment is on probation and the contract makes provision for the length of notice required for its termination such contract may be terminated —
(a) notwithstanding the length of notice provided for in the contract, by either party at any time during the first month of such employment without notice or payment in lieu;
(b) by either party at any time after the first month of such employment by giving to the other party notice of the agreed period, but not less than 7 days.”
In light of the Court of Appeal’s decisions in Law Ting Pong Secondary School, it seems the legal position in such scenario could possibly be, albeit awkward, (a) the employee will be required to give notice equals to such length as stated in the employment contract if he chooses to back out of the contract; and (b) no notice is required if he chooses to terminate his employment in the first month of his probation by operation of Section 6(3A) of the Employment Ordinance (which kicks in following the commencement of the employment).
How can OLN help?
As can be seen, it would be advisable for employers to clearly and expressly document in its employment contract the notice period and/or the termination mechanism if the employee fails to show up on the commencement date of employment as agreed. The degree of clarity required in this regard can be very demanding.
We have practical experience in helping employers with the drafting and review of employment-related documentation to ensure the same complies with the employment law regime in Hong Kong and latest development on the same, so as to protect employers’ interest.
On the other hand, we also assist, from time to time, employees on the review of employment-related documentation and advise employees on any potential legal consequences arising from their employment contracts.
If you have any question regarding the topic discussed or other employment issues, please contact our Partner Mr. Victor Ng at [email protected] or our associate Ms. Barbara Kwong at [email protected].com for further assistance.
Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.